DONORS WHO PROVIDE budget support to Malawi are withholding their aid to the Southern African country in reaction to the fraud in which millions of public funds have been siphoned from the government in what is known as Capital Hill cashgate scandal, named after the seat of power.
The fallout from the Capital Hill cashgate scandal has hit Malawi hard. International donors, who fund 40% of the country's budget, have halted disbursement until the whole issue can be satisfactorily solved.
The crime involved the systematic siphoning of cash from government coffers. Investigators say a loophole in the government payment system, adopted in 2005, known as Integrated Financial Management Information System (IFMIS), allowed the fraudsters to easily help themselves to millions of dollars of public money.
The amount discovered to be missing so far is above $250m.
The scandal first came light in September, a week after the country's Budget Director, Paul Mphwiyo, survived a shooting by unknown assailants at the gate of his house in the capital, Lilongwe. He was immediately flown to a South African hospital where three bullets were removed from his body.
State President Joyce Banda indicated that Mphwiyo was shot for threatening to reveal names of members of a syndicate which had been looting government money. Malawi police arrested and charged several civil servants, businessmen and government officials.
Government workers, mostly accounts assistants from the Auditor General's Office were also arrested after being found with cash stashed in their cars and houses. Several local companies were revealed as conduits of the millions paid without providing any service to the government.
Protecting the public
President Banda said the scandal had been discovered due to mechanisms which her administration had put in place to root out corruption in the country.
"I am assuring Malawians that my government will spare no one in the effort to root out corruption in the country and that I will not be intimidated in the fight of protecting what belongs to the public.
"I will make sure that all those involved in the plundering of government money are brought to book and I will shield no one," she said.
Barely a day later, President Banda dismissed the entire cabinet. She later dropped some cabinet ministers including Finance Minister, Ken Lipenga, and Justice Minister Kasambara.
In addition to the turmoil this has caused internally, the external blow-back is serious.